Hotels & Motels, CPA & Tax Services

Why Hotels and Motels in Dallas Need a CPA Who Understands Hospitality Tax

Hotel and motel owners in Dallas-Fort Worth deal with tax obligations that most CPAs rarely encounter. Between Texas hotel occupancy tax, cost segregation on the building, franchise fee deductions, and FF&E reserve accounting, a single misclassification can cost you tens of thousands of dollars in overpaid taxes or trigger a state audit. These are not issues a generalist accountant handles well.

At AG Freideman, we work directly with hotel and motel operators across Dallas, Plano, Frisco, and the surrounding DFW suburbs. Al Freideman is a licensed CPA with over 30 years of experience, and he handles every hospitality client personally. No junior staff, no hand-offs. When your hotel occupancy tax filing is due, Al is the one reviewing it. That personal attention is why we have 52 five-star Google reviews and zero negative reviews.

If you own or operate a hotel, motel, boutique inn, or extended-stay property in the Dallas-Fort Worth area, call us at (972) 893-3481 or book a free consultation to see how we can reduce your tax burden and keep your property compliant.

How Does Texas Hotel Occupancy Tax Work?

Texas imposes a 6% state hotel occupancy tax on every room rental of less than 30 consecutive days. This is separate from state sales tax. On top of the state rate, the City of Dallas adds a 7% local hotel occupancy tax, and Dallas County adds 2% more for venues. That means a Dallas hotel operator may collect up to 15% or more in combined occupancy taxes on each guest stay, depending on the exact local jurisdiction.

The Texas Comptroller requires that you file and remit state hotel occupancy tax on a schedule based on your collection volume. Properties collecting less than $1,500 per quarter file quarterly. Those collecting $1,500 or more per quarter file monthly. Late filings carry a 5% penalty if paid within 30 days of the due date, increasing to 10% after 30 days, plus interest that accrues from the due date.

• State hotel occupancy tax: 6%, collected from guests and remitted to the Texas Comptroller
• City of Dallas hotel tax: 7%, filed separately with the City of Dallas
• County and special district taxes: vary by location, up to 2% additional in parts of DFW
• Exemptions: stays of 30+ consecutive days are exempt, as are certain government and diplomatic guests (with proper documentation)

We handle your hotel occupancy tax filings at every level, making sure each layer is reported correctly and on time. Getting one jurisdiction wrong does not just mean a penalty; it can trigger an audit across all of them.

What Is Cost Segregation and Why Does It Matter for Hotel Properties?

Cost segregation is one of the most powerful tax strategies available to hotel and motel owners. It allows you to reclassify portions of your building from 39-year commercial property into shorter depreciation categories (5, 7, or 15 years), accelerating your depreciation deductions and reducing your federal tax liability in the early years of ownership.

A typical Dallas-area hotel has significant value in components that qualify for shorter depreciation lives. Carpet, furniture, decorative lighting, landscaping, parking lot paving, certain plumbing and electrical systems dedicated to specific equipment, and even some interior wall finishes can be reclassified. For a property valued at $5 million, a properly conducted cost segregation study can shift $1 million or more into accelerated depreciation categories.

Combined with the Section 179 deduction and bonus depreciation rules in effect for 2026, hotel owners can front-load substantial deductions in the year they acquire, renovate, or convert a property. We coordinate with qualified engineering firms to perform the study, then apply the results to your tax return to maximize your deductions while staying fully compliant with IRS guidelines.

How Should Hotels Account for Franchise Fees?

If you operate under a brand flag (Marriott, Hilton, IHG, Best Western, Wyndham, or any other franchise), you pay ongoing franchise fees that typically range from 4% to 6% of gross room revenue. These fees are deductible as ordinary business expenses, but the tax treatment depends on how they are categorized.

Initial franchise fees paid when signing a franchise agreement must be amortized over the life of the agreement (typically 15 to 20 years) rather than deducted in full in the year paid. Ongoing royalty fees, marketing fund contributions, and reservation system fees are deductible in the year incurred. Many hotel owners either deduct the initial fee entirely in year one (triggering IRS scrutiny) or fail to separate the ongoing components properly, leaving deductions on the table.

• Initial franchise fee: amortized over the franchise agreement term under Section 197
• Monthly royalty fees: fully deductible as ordinary business expenses
• Marketing and advertising fund contributions: deductible in the year paid
• Reservation system fees: deductible as a technology or service expense

We review your franchise agreement and make sure every component is classified correctly on your return, so you take the right deductions at the right time.

What Is FF&E Reserve Accounting and Why Do Hotels Get It Wrong?

FF&E (Furniture, Fixtures, and Equipment) reserves are funds set aside for replacing and upgrading guest room furnishings, lobby furniture, kitchen equipment, and other physical assets. Most franchise agreements and hotel management contracts require a monthly FF&E reserve contribution of 3% to 5% of gross revenue.

The common mistake is treating FF&E reserve contributions as a current-year expense. They are not. Setting money aside into a reserve account is not a deductible event. The deduction happens when you actually purchase the replacement furniture, fixtures, or equipment. The purchased assets must then be depreciated according to their IRS asset class (typically 5 or 7 years for hotel FF&E), unless they qualify for Section 179 or bonus depreciation.

We track your FF&E reserve balances, match actual purchases against the reserve, and apply the correct depreciation method to each asset. This keeps your books clean for franchise reporting and ensures your tax return reflects the deductions you have actually earned.

Hotel and Motel Tax Mistakes We Fix

After 30 years of working with business owners across multiple industries, Al has seen the same hospitality tax errors come up repeatedly. Here are the ones we fix most often for hotel and motel clients:

• Failing to separate state, city, and county hotel occupancy tax filings. Each jurisdiction has its own filing schedule, forms, and due dates. Paying one does not cover the others, and each one audits independently.
• Depreciating the entire hotel building over 39 years without a cost segregation study. This leaves hundreds of thousands of dollars in accelerated deductions unclaimed. If you bought or renovated your property and never had a cost segregation analysis, you are almost certainly overpaying.
• Deducting the initial franchise fee in full in year one. The IRS requires amortization over the agreement term. A full first-year deduction is an audit flag that can result in penalties and interest.
• Booking FF&E reserve contributions as current expenses. The reserve contribution is not deductible. Only the actual purchase of replacement assets creates a deduction, and those assets must be depreciated properly.
• Missing the 30-day exemption for extended-stay guests. Guests staying 30 or more consecutive days are exempt from hotel occupancy tax. If you are collecting and remitting tax on those stays, you are overcharging guests and creating a refund liability.

Our Hotel and Motel Accounting Services

We provide full-service tax preparation, bookkeeping, payroll, and compliance support for hotel and motel operators across Dallas-Fort Worth. Our monthly bookkeeping packages start at $300 to $600 per month and include bank reconciliation and payroll processing. Business tax preparation for S-Corps and partnerships ranges from $1,000 to $2,000. Texas Franchise Tax and Public Information Report filings run $250 to $500 annually.

Every price we quote is the price you pay. No hidden fees, no surprises. Check our transparent pricing page for full details.

Work with a CPA Who Knows the Hotel Business

Hotel and motel accounting is too specialized to trust to a generalist. Al Freideman has spent over 30 years helping Dallas-Fort Worth business owners with complex tax situations, and he handles every client personally. See what our clients say in our 52 five-star Google reviews, then call (972) 893-3481 or book your free consultation to get started.